Section 1231 Assets Includible Property Section 1231 assets include depreciable

Section 1231 assets includible property section 1231

This preview shows page 11 - 13 out of 24 pages.

Section 1231 Assets: Includible Property Section 1231 assets include depreciable property and land used in a trade or business and held long term. 17. They consist mainly of machinery and equipment, business cars and trucks, buildings, and land. They also may include certain livestock, unharvested crops on land used in a trade or business and held for the requisite time period, and the involuntary conversion of business property and capital assets also held for the requisite time period. Section 1231 Assets: Excludable Property The following items are not included in Section 1231 property: 18. Inventory (1) A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property (2) held by a taxpayer whose personal efforts created such property A publication of the United States government received from the government other than by purchase (3) at the price offered for sale to the public
214CCH Federal Taxation—Comprehensive TopicsChapter 12 ©2010 CCH. All Rights Reserved.Section 1231 Assets: First Netting The first netting consists of the netting of casualty or theft gains and losses from assets held long term. If 19. the casualty or theft gains exceed the casualty or theft losses, then a further netting is made with the Section 1231 gains or losses for the taxable year (the second netting). If the casualty or theft losses exceed the casualty or theft gains, all the casualty or theft gains and losses are separately treated as ordinary. Section 1231 Assets: Second Netting The second netting consists of the netting of Section 1231 gains and losses and any net casualty gains from 20. the first netting. Gains and losses from condemnations of business property held long term are included in this netting, but only condemnation gains from personal-use assets are included; condemnation losses from personal-use assets are not deductible so they are not considered in this netting. If the gains exceed the losses, the excess is a long-term capital gain. If the losses exceed the gains, all the gains and losses are ordinary. The excess of gains over losses is treated as ordinary income to the extent of Section 1231 net losses for the previous five years that have not been recaptured. Any Section 1231 gain in excess of these prior losses is a long-term capital gain. Section 1245 Property The purpose of Section 1245 is to prevent taxpayers from taking ordinary depreciation deductions and then 21. getting long-term capital gain treatment through Section 1231 at the time of sale of the property. Section 1245 Property: Recapture Rule Section 1245 property is really a subcategory of depreciable Section 1231 property. It is personal property 22. which is subject to depreciation or amortization. It includes property (not including a building or its structural components) if such property is tangible and was used as an integral part of specified business activities, amortizable property such as patents and leaseholds of Section 1245 property, and certain other

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture